Walmart Health Insurance Could Leave A Really Sick Worker Broke

Walmart made news recently when it eliminated healthcare insurance for its temporary workers. Only 30,000 out of approximately 1.4 million U.S. employees were affected, according to the company, because only that many part-time workers were receiving insurance benefits.

However, details about the insurance programs provided by Walmart suggest that a bigger story has been overlooked. Even many thousands of full-time workers employed by the company could find that a single serious illness or hospitalization could break them financially with deductibles and out-of-pocket expenses high enough to consume much of a year's earnings.

"Healthcare costs have increased each year and Walmart has worked hard to avoid passing on costs to our associates," Walmart spokesperson Randy Hargrove told me, an observation that would be of no surprise to anyone running a business. To help contain costs, the company will stop offering healthcare coverage to 30,000 employees who averaged fewer than 30 hours a week over the period from October 5, 2013 to October 5, 2014.

Walmart pharmacy worker

Walmart has told me in the past that approximately 40 percent of the company is part-time, which the company defines as fewer than 34 hours of work a week. According to Hargrove, many part-time employees may have been on a spouse's or parents' insurance plan, and so had not taken advantage of the coverage. In addition, there is the question of whether turnover and new hires would mean thousands of part-time workers brought on over the last year would not have officially been eligible, and so not count as part of the 30,000 losing coverage.

But there is a bigger problem that the particulars of the most popular plans at the company might leave people in financial disaster should the worst happen. According to Hargrove, the "most popular and lowest [cost]" plan is currently $18.40 for individual coverage every two week pay period. The amount will rise to $21.90 starting in January.

There is a $2750 deductible outside of preventative care mandated by the Affordable Care Act. After the deductible, the plan covers 80 percent of costs. The money employees have to pay themselves has an out-of-pocket annual maximum of $5,000. There is a minimum $250 health reimbursement that Walmart offers.

At issue is how much a seriously ill employee could face in expenses in a year. Let's work the numbers. Say someone lands in the hospital and faces a $30,000 bill. That amount is hardly unrealistic, given that in 2010, according to the federal government, the average hospital stay for all ages was $9,700. For adults in the 18 to 64 year range, the amount ran between $7,200 and $12,100. Recognize that those average costs are calculated across all patients, whether they face the full amount hospitals bill or the reduced sums that insurers often negotiate.

First the Walmart employee would face the $2,750 deductible, less the $250 reimbursement, or $2,500. That leaves $27,500, 20 percent of which is $5,500. Walmart's insurance would require the employee to pay $5,000.

An employee in for an extended stay or possibly an operation now faces bills of $7,500. That may be affordable for employees who make higher salaries, but it isn't for the bulk of Walmart workers. According to the company's corporate website, the average full-time employee makes $12.92 an hour. Call it $13, remembering that part-time employees make less, according to figures the company has provided me in the past.

At $13 an hour, even with a 40 hour week and 52 weeks of work a year, the person grosses $27,040 before taxes. Suddenly they might face a medical debt of 28 percent of that income.

Unfortunately, the high deductible options that a Walmart, other employer, or any insurer on the government-run healthcare insurance exchanges offer attract people who may not be able to afford the realities of coverage under serious illness. It's one of the reasons that, according to a Bankrate.com survey, 41 percent of people who make less than $30,000 have medical debts that top their emergency savings.

The low monthly rates are compelling to people who are unsure that they could afford more. Many don't recognize the potential risk they put themselves into, not that they could necessarily afford better coverage anyway.

It's another example of how income inequality operates throughout the country's economic systems. As the old Billie Holiday song lyrics go, "Them that's got shall have; them that's not shall lose.